On a GAAP basis, the operating loss was $0.2 million, which included a one-time charge of $15.7 million related to restricted-stock awards that vested upon the completion of the Company's IPO on October 21, 2010. On an adjusted basis, excluding this one-time charge, operating income increased 17% to $15.5 million.

On a GAAP basis, diluted EPS was $0.17 for the quarter, compared to $0.36 for the same period of the prior year. On an adjusted basis, excluding the restricted-stock charge and including an adjustment for income taxes, diluted EPS was $0.25 on 36.2 million weighted-average shares outstanding, compared to $0.22 on 35.4 million weighted-average shares outstanding in the comparable prior-year period.

"We are pleased with our strong financial results for the third quarter, our first as a public company," said Mike Ray, Vera Bradley's Chief Executive Officer. "Our solid sales momentum continued during the quarter, reflecting the strength and expanding appeal of our brand, the ongoing loyalty of our customers, and the strong response to our product offerings. Looking ahead, we remain focused on executing our growth strategies, which include expanding our product offerings and growing in underpenetrated markets in our Indirect and Direct channels."

Third Quarter Results

Vera Bradley reported net revenues of $91.6 million for the third quarter, compared to $72.8 million in the same period of the prior year, an increase of $18.8 million, or 26%. By segment, Indirect revenues increased 10% to $59.8 million, and Direct revenues increased 74% to $31.8 million, with comparable-store sales increasing 32.5%. For the quarter, gross profit rose 30% to $51.7 million, and gross margin improved from 54.8% to 56.4%.

During the quarter, the Company opened five new stores, bringing the total to 34 full-price stores and four outlet stores as of October 30, 2010. The Company opened one additional full-price store subsequent to the end of the third quarter, its final anticipated store opening of fiscal 2011.

The operating loss for the quarter was $0.2 million, compared to operating income of $13.2 million in the third quarter of fiscal 2010. On an adjusted basis, excluding stock-based compensation expense of $15.7 million related to restricted-stock awards that vested upon the completion of the Company's IPO, operating income increased 17% to $15.5 million.

On a GAAP basis, net income for the quarter was $6.0 million, compared to $12.8 million in the comparable prior-year period. GAAP earnings per diluted share totaled $0.17 for the quarter, compared to $0.36 for the same period of the prior year. Net income for the current quarter included the previously discussed restricted-stock expense and a tax benefit of $6.8 million related in part to the Company's conversion from an "S" Corporation to a "C" Corporation for tax purposes. On an adjusted basis, excluding the restricted-stock expense and including an adjustment for income taxes as if the Company had been a "C" Corporation at the beginning of each period described (at an assumed combined effective tax rate of 40%), net income for the quarter increased 15% to $9.0 million, from $7.8 million a year ago, and diluted earnings per share increased to $0.25 on 36.2 million weighted-average shares outstanding, from $0.22 on 35.4 million weighted-average shares outstanding in the comparable prior-year period.

Operating income for the thirty-nine weeks totaled $26.8 million, down 3% from $27.7 million a year ago. On an adjusted basis, excluding $15.8 million of stock-based compensation expense related to the restricted-stock awards and $6.1 million of compensation expense for bonuses paid to recipients of the restricted-stock awards to satisfy tax obligations, operating income increased 76% to $48.7 million.

On a GAAP basis, net income for the thirty-nine weeks rose 23% to $32.0 million, from $25.9 million a year ago. Net income for the thirty-nine weeks included the previously discussed restricted-stock and bonus expenses as well as the tax benefit recognized in the third quarter. On an adjusted basis, excluding the restricted-stock and bonus expenses and including an adjustment for income taxes as if the Company had been a "C" Corporation at the beginning of each period described (at an assumed combined effective tax rate of 40%), net income for the thirty-nine weeks increased 79% to $28.5 million, from $15.9 million in the comparable prior-year period, and diluted earnings per share increased to $0.80 on 35.7 million weighted-average shares outstanding, from $0.45 on 35.4 million weighted-average shares outstanding in the comparable prior-year period.

Call Information

A conference call to discuss third quarter results is scheduled for today, December 7, 2010, at 4:30 PM Eastern Time. A broadcast of the call will be available on the Company's website, www.verabradley.com. In addition, a replay of the call will be available shortly after the conclusion of the call and remain available until December 21, 2010. To access the telephone replay, listeners should dial (877) 870-5176. The access code for the replay is 7269477.

About Vera Bradley, Inc.

Friends Barbara Bradley Baekgaard and Patricia R. Miller founded Vera Bradley in 1982. Today, Vera Bradley is sold through 3,300 specialty stores as well as 39 Vera Bradley stores nationwide. Vera Bradley accessories, handbags, and travel and paper & gift items have recently been spotted on Desperate Housewives, Brothers and Sisters, Entourage, and Modern Family, and in over 20 feature-length films. Visit www.verabradley.com for a store near you or to learn more.

Forward-Looking Statements

Certain statements in this release are "forward-looking statements" made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the Company's current expectations or beliefs concerning future events and are subject to various risks and uncertainties that may cause actual results to differ materially from those that we expected, including: possible adverse changes in general economic conditions and their impact on consumer confidence and spending; possible inability to predict and respond in a timely manner to changes in consumer demand; possible loss of key management or design associates or inability to attract and retain the talent required for our business; possible inability to maintain and enhance our brand; possible inability to successfully implement our growth strategies or manage our growing business; possible inability to successfully open new stores as planned; and possible inability to sustain levels of comparable-store sales. For a discussion of these and other risks and uncertainties that could cause actual results to differ materially from those contained in our forward-looking statements, please refer to "Risk Factors" in our Registration Statement on Form S-1, as amended (File No. 333-167934), which became effective on October 20, 2010. We undertake no obligation to publicly update or revise any forward-looking statement. Financial schedules are attached to this release.

Vera Bradley, Inc.

Consolidated Balance Sheets

($ in thousands)

(unaudited)

Assets

October 30,
2010

January 30,
2010

October 31,
2009

Current assets:

Cash and cash equivalents

$ 5,873

$ 6,509

$ 4,355

Accounts receivable, net

28,842

31,013

25,128

Inventories

83,688

66,535

50,836

Other current assets

5,724

6,468

4,532

Deferred income taxes

9,105

--

--

Total current assets

133,232

110,525

84,851

Property, plant, and equipment, net

41,140

40,123

44,116

Restricted cash

--

1,500

1,500

Other assets

2,525

1,604

1,481

Total assets

$ 176,897

$ 153,752

$ 131,948

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable

$ 20,785

$ 19,221

$ 18,464

Distributions payable

--

1,091

3,865

Accrued employment costs

13,814

14,181

10,692

Other accrued liabilities

10,744

9,772

6,806

Current portion of long-term debt

82

5,022

5,022

Total current liabilities

45,425

49,287

44,849

Long-term debt

76,978

25,114

11,869

Deferred income taxes

2,501

--

--

Other long-term liabilities

1,996

1,458

1,423

Total liabilities

126,900

75,859

58,141

Shareholders' equity:

Common stock

--

1

1

Additional paid-in-capital

71,833

--

--

Retained earnings (accumulated deficit)

(21,836)

77,892

73,806

Total shareholders' equity

49,997

77,893

73,807

Total liabilities and shareholders' equity

$ 176,897

$ 153,752

$ 131,948

Vera Bradley, Inc.

Consolidated Statements of Income

($ in thousands, except per share amounts)

(unaudited)

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

October 30,
2010

October 31,
2009

October 30,
2010

October 31,
2009

Net revenues

$ 91,595

$ 72,752

$ 256,672

$ 203,839

Cost of sales

39,921

32,874

109,362

99,724

Gross profit

51,674

39,878

147,310

104,115

Selling, general, and administrative expenses

53,239

30,030

125,824

84,755

Other income

1,373

3,385

5,286

8,365

Operating income (loss)

(192)

13,233

26,772

27,725

Interest expense, net

584

259

1,227

1,274

Income (loss) before income taxes

(776)

12,974

25,545

26,451

Income tax (benefit) expense

(6,775)

208

(6,418)

523

Net income

$ 5,999

$ 12,766

$ 31,963

$ 25,928

Basic weighted-average shares outstanding

36,082,298

35,440,547

35,654,464

35,440,547

Diluted weighted-average shares outstanding

36,213,361

35,440,547

35,699,156

35,440,547

Basic net income per share

$ 0.17

$ 0.36

$ 0.90

$ 0.73

Diluted net income per share

0.17

0.36

0.90

0.73

Vera Bradley, Inc.

Supplemental Information - Consolidated Statements of Income

Reconciliation of GAAP to Non-GAAP Financial Measures

($ in thousands, except per share amounts)

(unaudited)

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

October 30,
2010

October 31,
2009

October 30,
2010

October 31,
2009

Operating income

$ (192)

$ 13,233

$ 26,772

$ 27,725

.

Adjustments

Stock-based compensation expense relating to restricted-stock awards

15,703

--

15,790

--

Bonus compensation expense relating to restricted-stock awards

--

--

6,132

--

Total adjustments

15,703

--

21,922

--

Adjusted operating income

15,511

13,233

48,694

27,725

Interest expense, net

584

259

1,227

1,274

Adjusted income before income taxes

14,927

12,974

47,467

26,451

Adjusted income tax expense*

5,971

5,190

18,987

10,580

Adjusted net income

$ 8,956

$ 7,784

$ 28,480

$ 15,871

Adjusted net income per share:

Basic

$ 0.25

$ 0.22

$ 0.80

$ 0.45

Diluted

0.25

0.22

0.80

0.45

*Assumes a combined federal, state, and local effective tax rate of 40%.